Masters Theses

Date of Award

5-1996

Degree Type

Thesis

Degree Name

Master of Science

Major

Agricultural Economics

Major Professor

Darrell Mundy

Committee Members

Robert Miller, Donald Fowlkes, James Larson

Abstract

In 1993 tobacco led all crops in cash receipts for the state of Tennessee. Tobacco production added approximately 18 percent to the total crop sales within the state. Due to increasing world competition and the threat of increasing taxes to the sale of tobacco products in the United States, tobacco producers may face an unstable future. Given the importance of tobacco to the state's economy, research that identifies methods of reducing the total production cost of hurley tobacco is significant.

The primary objective of this economic research was to economically analyze selected transplant production systems for hurley tobacco. Secondary objectives were to identify within any specific system any economies of size that may have existed and to compare and contrast economic differences across the selected systems. The objectives of the study were accomplished by constructing cost budgets for the selected alternative transplant production systems.

Cost budgets for conventional, outdoor floatbed, and greenhouse floatbed systems, were generated and comparison both within and across systems were made. Within the outdoor floatbed systems, three alternative production systems were analyzed: plug and transfer, seed and transfer, and direct seeded. Budgets were also generated for a transplant production system that incorporated both the outdoor and the greenhouse floatbed systems. This system allows the greenhouse to be seeded twice thus reducing capital cost by decreasing the size of greenhouse needed to produce a given number of transplants per season. Within each of the alternative systems, multiple budgets were derived that differed in the number of transplants that could be produced with the given production system.

All production costs were viewed as cost of producing 1,000 usable transplants. A usable transplant is taken as a transplant that is uniform to other transplants and will have the ability to survive and thrive after transplanting. Data were gathered and/or synthesized from a number of sources including some previous work and an integration of information taken from local producers of transplants and the suppliers that offer the needed equipment and materials to accomplish the production process.

Although no single alternative was least-cost for all sizes of production, there were some interesting results when grouping production into small, medium and large production categories. With the smaller sizes of production (less than 75,000 transplants produced), the direct seeded outdoor waterbeds were the least-cost alternative. In the medium-sizes range (50,001 - 150,000 transplants produced), the direct seeded outdoor transplant production system was still the least-cost alternative for the systems at the lower end of this category. The conventional production system was least-cost in the larger sizes of production. Within the large-size range (more than 150,000 transplants produced), the conventional production system was still the least-cost alternative at the lower end of the size range and the greenhouse production system was the least-cost alternative at the mid and higher levels.

Once the cost budgets were developed and analyzed, a break-even analysis on four specific cost variables was undertaken. The cost variables chosen for analysis were wage rates, amounts of total labor needs, interest rates, and usability rates. This analysis was performed to identify the sensitivity of the results to potential measurement and judgement errors and to have a better understanding of how relaxing some assumptions made in the budget building process would change the results. Alternative production systems that produce relatively the same number of transplants were paired off as competing systems. There were specific instances within competing systems where relatively small changes in usability rates, changes in labor needs, and wage rate changes could lead to indifference of cost between the competing systems. However, the least-cost solutions were generally not extremely sensitive to variability in the four variables under investigation.

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